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The international rating agency Fitch Ratings has adjusted Eskom’s credit rating upwards, in line with the recent improvement in South Africa’s sovereign credit rating.
Eskom welcomed the news on Friday and indicated that the upgrade reflects exactly how closely the utility company’s credit profile is linked to that of the state.
According to the new rating, Eskom’s long-term issuer default rating (IDR) has been raised from B to B+, while the overall outlook has been confirmed as stable.
The senior unsecured debt was also adjusted upwards from B to B+, while the recovery rating remains unchanged at RR4. As for the government-guaranteed senior unsecured debt, Fitch raised it from the previous level of BB- to BB.
Fitch’s decision follows the recent upgrade of South Africa’s sovereign credit rating and reflects Eskom’s strong connection to the state within the credit rating agency’s methodology for state-related entities.
The agency assessed the relationship between Eskom and the government as strong, particularly in relation to oversight, policy role and the established history of government support.
According to Fitch, however, Eskom’s rating in accordance with this framework remains one level below that of the sovereign state.
Dan Marokane, Eskom’s group CEO, says the development is confirmation of the company’s ongoing repair work.
“Our focus remains on execution. We continue to implement our recovery strategy with urgency to restore operational and financial stability, maintain energy security and position Eskom for sustainable long-term growth that supports the economy,” Marokane said.
He says Eskom and the country are increasingly moving towards a more stable energy platform.
“With improved grid stability, progress in market liberalization and the increasing integration of renewable energy, Eskom, and therefore South Africa, now has a more stable electricity platform on which to operate and grow.”
Eskom views the upgrade as a positive indication of improving macroeconomic conditions and continued recognition of the utility company’s central role in South Africa’s energy sector.
The group says it remains focused on strengthening operational performance, improving liquidity and access to finance, and executing its recovery plan in support of long-term financial sustainability.
